Uk anti bribery act slideshow 0211 final

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  • Remember and employee can’t pass the due diligence test as easily as your FCPA examYou started the car, pushed the gas and went to sleep
  • Most organizations are spending an inordinate amount of time confirming who a person or company is….In the other 185 countries, addresses are not conistant, privacy laws prevent the gathering and storing of details
  • When you should be trying to establish who they aren’t…..Instant checks are only available in 10 countries, all other verification of this information is based on “boots on the ground” investigation by a company like KrellerAccording to the FCPA professor, in 2010 60% of the foreign officials “bribed” were executives of SOEsSolid referencesWho is this guy?
  • If you are John Doe, and they are no foreign officials named John Doe, you Maybe 3rd party linked ot high risk activity, acquired by SOE, change in Mgt where FO is now in position of powerHow many of you can hit a button and pull up the number of vendors, agents, resellers, around the world?NonCent, once a week I hear – I don’t know the number of distrs., resellers, vendors, ……How many of you check to see if you one your partners, agents resellers, etc is not in prison somewhere?How many of you get a copy of an ID from a potential 3rd party?
  • Juan Ramirez, 140 exact matches to foreign officials with the name components “Juan” and “Ramirez”
  • Juan Ramirez, 140 exact matches to foreign officials with the name components “Juan” and “Ramirez”
  • Juan Ramirez, 140 exact matches to foreign officials with the name components “Juan” and “Ramirez”
  • XYZ company in India, is being investigated for bribery, if they can be replaced by company w/ identical services and price – why bother?Guy in Africa, Machinery to move equipmentchurch
  • XYZ company in India, is being investigated for bribery, if they can be replaced by company w/ identical services and price – why bother?Guy in Africa, Machinery to move equipmentchurch
  • If you are a large organization where information is kept in multiple silos, CRM SAP, proprietary system….You most likely have vetting processes that is somewhat localized, and therefore uneven.As you can tell, this is a chaotic and ineffecient process that allows for an inconsistent risk assessment of vendors across borders
  • If you are a large organization where information is kept in multiple silos, CRM SAP, proprietary system….You most likely have vetting processes that is somewhat localized, and therefore uneven.As you can tell, this is a chaotic and ineffecient process that allows for an inconsistent risk assessment of vendors across borders
  • If you are a large organization where information is kept in multiple silos, CRM SAP, proprietary system….You most likely have vetting processes that is somewhat localized, and therefore uneven.As you can tell, this is a chaotic and ineffecient process that allows for an inconsistent risk assessment of vendors across borders
  • Never entered in procurement system or CRM until vetted
  • Never entered in procurement system or CRM until vetted
  • The longer you maintain a relationship with a 3rd party, the more likely their As you know, Section 8B2.1 of US Sentencing Guidelines lists periodic risks, but isn’t doing business with a company investigated for not just corruption, but fraud, bad business?a) You haven’t properly risk rated your customer for the last 10 monts b) Govt of Whizitstan is now talking to the DOJ….
  • The longer you maintain a relationship with a 3rd party, the more likely their As you know, Section 8B2.1 of US Sentencing Guidelines lists periodic risks, but isn’t doing business with a company investigated for not just corruption, but fraud, bad business?a) You haven’t properly risk rated your customer for the last 10 monts b) Govt of Whizitstan is now talking to the DOJ….
  • The longer you maintain a relationship with a 3rd party, the more likely their As you know, Section 8B2.1 of US Sentencing Guidelines lists periodic risks, but isn’t doing business with a company investigated for not just corruption, but fraud, bad business?a) You haven’t properly risk rated your customer for the last 10 monts b) Govt of Whizitstan is now talking to the DOJ….
  • On average, Google has 500 new sources of info using the phrase “corruption investigation”
  • Uk anti bribery act slideshow 0211 final

    1. 1. The UK Bribery Act 2010: Is Your Business Ready?<br />Michael Volkov<br />Partner<br />(202) 263-3288<br />mvolkov@mayerbrown.com<br />February 2011<br />
    2. 2. Overview<br />Background <br />Political Considerations <br />FCPA V. Bribery Act 2010<br />Practical Guidance <br />Overview of the Bribery Act<br />UK Enforcement Authorities and Challenges<br />2<br />
    3. 3. Background<br />The Act has been described by The Wall Street Journal as a “…caffeinated sibling of the Foreign Corrupt Practices Act…”<br />Prior to the Act, international community criticized UK bribery laws and enforcement efforts<br />Bribery Act received Royal Assent in April 2010<br /> -- The Act will replace all existing bribery laws and the effective date has been delayed past April 2011<br /> -- The Act will not be applied retrospectively, so existing anti-bribery laws will still be relevant<br />
    4. 4. Political Considerations<br />UK prosecutors have stated they intend to aggressively enforce the Act against UK and global companies, especially given broad jurisdictional reach of the Act<br />Business community has raised significant objections to economic impact of UK aggressive enforcement<br />UK government has initiated “review” of Bribery Act but no significant changes are expected given UK’s poor standing historically on prosecuting bribery cases<br />Guidance on “adequate procedures” definition was supposed to be finalized by end of January 2011, three months in advance of effective date, but was delayed again on Monday<br />4<br />
    5. 5. Political Considerations (Cont.)<br />The delay in the effective date from April 2011 is not expected to be very long but 3-month lead time between guidance and effective date will be maintained<br />Government will issue guidance on the Act <br />Guidance on “adequate procedures” is expected soon<br />Ministry of Justice intends to issue guidance on the Act itself not just 'adequate procedures‘<br />The Serious Fraud Office (SFO) and the Crown Prosecution Service plan to issue guidance to prosecutors as to how the Act is to be enforced. <br />5<br />
    6. 6. FCPA Versus Bribery Act:Key Similarities<br />Both cover payment of money or anything of value (Bribery Act – “financial or other advantage”)<br />Definition of “person associated” (which applies only to failure of organization to prevent bribery) is broad and covers direct and indirect bribes made through third party agents, distributors, consultants and other others<br />Broad jurisdictional reach<br />6<br />
    7. 7. FCPA Versus Bribery Act:Key Differences<br />Public and private bribery is covered by Bribery Act<br />No requirement for corrupt intent in Bribery Act (for bribery of foreign official it is “intention to influence” official in the performance of his/her functions)<br />No facilitation exception for “grease payment”<br />Corporate offense for failing to prevent bribery and “adequate procedures” defense<br />Potential punishment is greater: 10 years imprisonment versus 5 for FCPA; Unlimited fines for Bribery Act. Sentencing Guidelines will be issued on this issue.<br />Absence of non-prosecution or deferred prosecution agreements<br />7<br />
    8. 8. What Does it Mean for My Business?<br />The Bottom Line: Proactive Compliance is a MUST<br />You want to avoid being the “guinea pig” for SFO enforcement<br />Companies “doing business” in the UK need to design and implement compliance programs which meet the FCPA and Bribery Act<br />Bribery Act is more stringent than FCPA on some issues<br />Existing compliance programs will have to be modified to meet Bribery Act requirements<br />Updated training and guidance should be prepared in advance and modified as developments warrant<br />Enforcement and interpretation of Bribery Act will be dynamic and require companies to keep up with requirements<br />8<br />
    9. 9. A Dose of Reality: What Do We Expect to Happen?<br /><ul><li>Prosecutors are aware of political sensitivity to aggressive prosecution of UK and global companies which may “damage” UK economic interests
    10. 10. Prosecutors are likely to focus initially on those “egregious” cases where UK connection is clear and corrupt conduct is indisputable
    11. 11. UK courts may also take active role to interpret Act to limit application
    12. 12. UK prosecutors will have to balance strong enforcement statements against political pushback – not clear how this balance will play out
    13. 13. As in the US, consequences for global companies can be significant if convicted of bribery violations
    14. 14. Self-reporting, like voluntary disclosures in the US, may become the “engine” for prosecutors to enforce the Act and secure large fines</li></li></ul><li>Bribery Act Creates Four New Bribery Offenses<br /><ul><li>Two general offenses for bribing or taking a bribe
    15. 15. A discrete offense of bribing a foreign public official
    16. 16. A new corporate offense for failure to prevent bribery</li></li></ul><li>Bribery Act Prohibits Wide Range of Conduct<br />The Act recognizes that a bribe may take many different forms (“financial or other advantage”) <br />Overly lavish or extravagant corporate hospitality and promotional activities may constitute a violation of the general offenses, particularly if made to a foreign public official<br />11<br />
    17. 17. Two General Bribery Offenses<br />Person who offers, promises or gives a bribe<br />No requirement to prove corrupt intent, only intention to induce person to act improperly or reward improper performance<br />Person who requests, agrees to receive or accepts a bribe. <br />In some situations not necessary for person being bribed to know that he/she is ”improper[ly] perform[ing] function.”<br />It is irrelevant whether the bribe flows through an intermediary or whether the bribe actually is given or accepted<br />12<br />
    18. 18. Bribing a Foreign Public Official<br />No intention to induce improper performance is required; no dishonesty or criminal impropriety need be established<br />All that is required is an intent to “influence” the official in the performance of his/her official functions to obtain/retain business or a business advantage<br />A foreign public official includes: <br />a person holding a legislative, administrative or judicial post (whether appointed or elected) in a country or territory outside the United Kingdom; <br /> a person who exercises a public function on behalf of a country or territory outside the United Kingdom or for a public agency or public enterprise of that country or territory and <br />a person who is an agent or official of a public international organization. <br />No exception for small facilitation (or “grease”) payments<br />13<br />
    19. 19. Jurisdictional Reach <br />Bribing, being bribed, bribing a foreign public official<br />If the conduct element of these bribery offenses take place in the UK, the UK courts will have jurisdiction<br />UK nationals, those ordinarily resident in the UK and companies or partnerships incorporated or formed in the UK who commit acts of bribery abroad are subject to prosecution in the UK even if no part of the bribery offence takes place in the UK<br />14<br />
    20. 20. Failure of a Commercial Organization to Prevent Bribery<br />Person associated with a commercial organisation bribes another intending to obtain or retain business or to obtain or retain a business advantage <br />The Act provides a defense if the commercial organization establishes it had “adequate procedures” in place to prevent such bribery from occurring<br />A “commercial organization” includes those companies or partnerships incorporated or formed in the United Kingdom and that carry on business in the United Kingdom or elsewhere, and those companies and partnerships incorporated or formed overseas that “carry on a business or part of a business in the UK.” <br />The term “associated persons” includes any person who “performs services for or on behalf of the relevant commercial organisation” – and may include subsidiaries, employees, agents, JV partners, consortium members<br />The bribery may occur anywhere in the world – a conviction for bribery in the local jurisdiction is not required<br />15<br />
    21. 21. Failure of a Commercial Organization to Prevent Bribery : Jurisdictional Reach<br />Business presence test could be very easily satisfied (for example, by having a UK subsidiary or branch office) and therefore this new offence should be a concern for all non-UK commercial organizations that are or may become subject to this part of the Act. <br />The bribery by the person associated with the commercial organization may take place wholly outside the United Kingdom and it is irrelevant whether the commercial organization is aware or has any knowledge of it. <br />16<br />
    22. 22. Extraterritorial Reach of UK Anti-Bribery Act<br />Richard Alderman, the current Director of the Serious Fraud Office, recently stated: <br />“For the first time, non-UK companies will be brought within the jurisdiction of the SFO if they have some business presence in the UK. What this will mean is that a foreign corporate which is involved in corruption anywhere in the world will be within the SFO’s jurisdiction if it has a business presence here even if the corruption has no connection with that business presence. This is a very important provision for us. I believe that foreign corporates are waking up to the significance of this.”<br />17<br />
    23. 23. “Adequate Procedures” Defense <br />Act requires UK government to issue guidance on what constitutes “adequate procedures” <br />Draft guidance issued in September 2010 - principles-based and does not prescribe specific procedures<br />Six management principles:<br />risk assessment<br />top-level commitment, <br />due diligence, <br />clear, practical and accessible policies and procedures, <br />effective implementation, and <br />monitoring and review. <br />Guidance due to be finalized and published soon<br />18<br />
    24. 24. Penalties for the New Bribery Offenses<br />Individuals who are convicted may face up to 10 years imprisonment and/or an unlimited fine. <br />Companies face an unlimited fine. <br />On a conviction, prosecutors may obtain a criminal confiscation order to disgorge benefits, i.e. the value of any business obtained or retained by a bribe and will not be limited to net profits or value of bribe (Proceeds of Crime Act 2002)<br />UK does not allow non-prosecution or deferred prosecution agreements (closest equivalent are civil recovery orders)<br />19<br />
    25. 25. Collateral Consequences of Violation<br />Director disqualification may prohibit a person acting as a director or shadow director of any UK company for up to 15 years<br />EU Public Sector Procurement Directive 2004 – conviction for a corruption offense will result in automatic debarment from EU public sector contracts <br />Bribery can amount to “criminal conduct” for money laundering and property derived from such conduct may constitute “proceeds of crime” <br />Regulatory/disciplinary action; Reputational damage<br />Risk of legal action by shareholders and/or competitors<br />20<br />
    26. 26. Senior Officers’ Liability <br />Senior officer at company may be liable for three general bribery offenses if he /she “consented or connived” in the commission of that offense<br />“Senior Officer” = director, secretary, manager, partner or someone purporting to act in that capacity<br />If the conduct occurs outside the UK, the “Senior Officer” must have a “close connection” to the UK (e.g. British citizen, a person with British citizen rights who is ordinarily resident in the UK)<br />“Consented or connived” require some awareness of the material facts. <br /> “Consent” requires some agreement to the course of action followed<br />“Connive” requires only tacit agreement or the turning of a blind eye. <br />21<br />
    27. 27. UK Enforcement Authorities<br />The SFO has the lead role in investigating and prosecuting cases of serious or complex fraud – it is the UK’s principal enforcement agency for overseas bribery<br />The City of London Police Overseas Anti-Corruption Unit (est. 2007) – will investigate cases of overseas bribery which the SFO determines do not meet threshold for SFO investigation<br />Only the SFO and the Crown Prosecution Service are authorized to prosecute offences of bribery<br />Serious Organised Crime Agency – investigates money laundering offenses<br />22<br />
    28. 28. Serious Fraud Office’s Enforcement Approach<br />The SFO has made overseas corruption offences a priority and encourages self-reporting<br />SFO goal is to settle self-reported cases with civil penalties assuming no involvement of high-level officers or board members<br />SFO and company agree in advance on scope of internal investigation. Corporation bears the expense of internal investigation. <br />SFO reviews internal investigation outcome and the SFO determines with negotiations what sanction is appropriate (civil v. criminal and amount)<br />23<br />
    29. 29. Self-Reporting Benefits<br />May face only civil fines rather than criminal sanctions<br />Greater ability to control scope of internal investigation<br />Manage issues and publicity<br />Perceived as responsible corporate actor<br />Can avoid EU mandatory debarment provisions and other collateral consequences so long as not convicted of a corruption offense<br />24<br />
    30. 30. Risks of Deciding Not to Self-Report<br />SFO may learn of conduct from another agency (UK, US, World Bank or others), suspicious activity report (SAR), whistleblower, or competitor<br />SFO will be more likely to conduct aggressive investigation and prosecution leading to criminal sanctions <br />Potential criminal penalties for individuals, including imprisonment<br />Will not receive any “discount” for self-reporting<br />SFO has considerable investigative powers at its disposal (e.g. Criminal Justice Act 1987; Regulation of Investigatory Powers Act 2000)<br />An SFO investigation is lengthy and costly and involves considerable publicity and disruption to the business<br />25<br />
    31. 31. Challenges Facing Enforcement<br />Writing on a clean slate in this political environment can be difficult<br />How should they exercise discretion? What penalties will they seek? <br />How will SFO coordinate with other jurisdictions? <br />What about joint dispositions? In BAE, Justice and SFO reached joint disposition with BAE but resolution had bumpy ride in UK courts where deal was criticized for intruding on judicial discretion<br />How will prosecutors and courts deal with whistleblowers who come forward and report criminal activity? <br />How should the prosecution approach asset forfeiture when a corporation has obtained a business advantage as a result of corruption?<br />How should current guidelines on plea discussions be interpreted when it comes to joint submissions (plea agreement) on sentencing?<br />Courts have criticized joint agreement as intruding on judicial discretion to impose penalty (Innospec Limited (March 2010) and Dougall (April 2010). <br />26<br />
    32. 32. The UK Bribery Act 2010: Is Your Business Ready?<br />Uncovering Connections: The Optimal 3rdParty Due Diligence Checklist<br />Ryan Morgan<br />FCPA Specialist<br />(877) 258-1877 x 262 <br />ryanm@worldcompliance.com<br />January 2011<br />
    33. 33. Cornerstone of your anticorruption <br />program….<br />Why is Due Diligence so important to your Anti Corruption Program?<br />First line of defense<br />Important mechanism for measuring effectiveness<br />Only part of your program that protects you continuously<br />You can’t circumvent a solid due diligence program<br />28<br />
    34. 34. Who they are<br />Who “they” are – Identity Verification<br /><ul><li>They – any agent, distributor, M & A Partner, client and vendor
    35. 35. Verification confirms they are “who we thought they were”
    36. 36. Works well in 10 Countries, other places…
    37. 37. “Who they are” is just half the pie</li></ul>William Kelleher - Reseller in Ireland<br />CarraignabhFear<br />Cork City, Ireland <br />DOB 1/15/1972<br />29<br />
    38. 38. Who they aren’t…<br />Due diligence confirms <br />Who they aren’t - Negative Database<br /><ul><li>3rd Party is not affiliated with a foreign government, SOE, purchasing decision for a government entity
    39. 39. 3rd party is not being investigated for corruption (or fraud, or money laundering, etc.)</li></ul>William Kelleher Billy Kelleher<br />President, XYZ FO Mstr. of State ,Trade and Commerce<br />CarraignabhFear 1st Street<br />Cork City, Ireland  Dublin, Ireland <br />DOB 1/15/1960 DOB 1/20/1968<br />30<br />
    40. 40. Due Diligence Traps<br /><ul><li> Lack of continuity/slow process
    41. 41. Non centralized vetting process
    42. 42. Lack of ongoing due diligence process
    43. 43. Lack of information on partner</li></ul>31<br />
    44. 44. Shotgun Approach<br />New relationships engaged 2/3/11<br />$<br />$<br />$<br />$<br />$<br />$<br />32<br />
    45. 45. Shotgun Approach<br />Vetting done based on Geography or perceived risk <br />$<br />M<br />L<br />$<br />$<br />L<br />$<br />M<br />$<br />H<br />$<br />L<br />33<br />
    46. 46. Shotgun Approach<br />New relationships engaged 2/3/11<br />Risk rated, vetted 3/3/11<br />Low Risk Hits – 2 Days<br />$<br />$<br />Medium Risk Hits – 2 Weeks<br />$<br />$<br />$<br />High Risk Hits – 1 Month<br />$<br />34<br />
    47. 47. Systematic Approach<br />$<br />$<br />$<br />$<br />$<br />$<br />35<br />
    48. 48. Systematic Approach<br />2 days for a majority of the hits<br />$<br />$<br />$<br />$<br />$<br />$<br />36<br />
    49. 49. Decentralized Vetting Process<br />Deconflicting<br /><ul><li>First Line of defense
    50. 50. Important mechanism of controls
    51. 51. Only part of your program that protects you continuously</li></ul>37<br />
    52. 52. Decentralized Vetting Process<br />Deconflicting<br /><ul><li>First Line of defense
    53. 53. Important mechanism of controls
    54. 54. Only part of your program that protects you continuously</li></ul>38<br />
    55. 55. Decentralized Vetting Process<br />Deconflicting<br /><ul><li>First Line of defense
    56. 56. Important mechanism of controls
    57. 57. Only part of your program that protects you continuously</li></ul>?<br />39<br />
    58. 58. Centralized Process<br />Deconflicting<br /><ul><li>First Line of defense
    59. 59. Important mechanism of controls
    60. 60. Only part of your program that protects you continuously</li></ul>40<br />
    61. 61. Centralized Process<br />Consistent risk rating<br />Ongoing Due Diligence now possible<br />Deconflicting<br /><ul><li>First Line of defense
    62. 62. Important mechanism of controls
    63. 63. Only part of your program that protects you continuously</li></ul>41<br />
    64. 64. Annual Risk Assessments<br />January, 2011 ABC Corporation is now a reseller<br />2011<br />Initial Due Diligence<br />Who they are/<br />Who they aren’t<br />No Risk<br />42<br />
    65. 65. Annual Risk Assessments<br />January, 2011 ABC Corporation is now a reseller<br />2012<br />Annual Due Diligence<br />2011<br />Initial Due Diligence<br />Who they are/<br />Who they aren’t<br />No Risk<br />43<br />
    66. 66. Time is your enemy…<br />February, 2012 ABC Corp. is now investigated in Whereizitstan<br />January, 2011 ABC Corporation is now a reseller<br />2013<br />Annual Due Diligence<br />2012<br />Annual Due Diligence<br />2011<br />Initial Due Diligence<br />Who they are/<br />Who they aren’t<br />No Risk<br />44<br />
    67. 67. Ongoing Due Diligence<br />January, 2011 ABC Corporation is now a reseller<br />February, 2012 ABC Corp. is now investigated in Whereizitstan<br />2012<br />Annual Assessment<br />Ongoing Due Diligence<br />Who they are/<br />Who they aren’t<br />…risk is detected in days of the action<br />2011<br />Initial Due Diligence<br />Who they are/<br />Who they aren’t<br />No Risk<br />Ongoing Due Diligence goes forward indefinitely<br />45<br />
    68. 68. TLI, Too Little Information<br />You can’t prove “who they aren’t” without the proper information:<br />WorldCompliance has 140 Foreign Officials or their contacts containing “Juan and Ramirez” <br />Without a UI, Unique Identifier, you can waste valuable time and money proving who they are<br />46<br />
    69. 69. How quickly can you deconflict a potential risky partner?<br />Is your new consultant, Margarita Calderon, born 1957, linked to a foreign official?<br />47<br />
    70. 70. Links to foreign governments may be easy…<br />48<br />
    71. 71. How quickly can you deconflict a potential risky partner?<br />Is your new consultant, Margarita Calderon born 1957 linked to a foreign official?<br />49<br />
    72. 72. The UK Bribery Act 2010: Is Your Business Ready?<br />Q&A<br />Ryan Morgan<br />FCPA Specialist<br />(877) 258-1877 x 262 <br />ryanm@worldcompliance.com<br />Michael Volkov<br />Partner<br />(202) 263-3288<br />mvolkov@mayerbrown.com<br />

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